Marvell Technology Group Ltd. Headquarters, Santa Clara, California, September 6, 2024.
David Paul Morris | Bloomberg | Getty Images
semiconductor company marvel On Tuesday, the company announced it would acquire Celestial AI for at least $3.25 billion in cash and stock.
Marvell said the deal could increase to $5.5 billion if Celestial reaches revenue milestones.
Marvell shares rose 13% in after-hours trading Tuesday after the company reported better-than-expected third-quarter results and said on an earnings call that it expects data center revenue to rise 25% next year.
This deal is an aggressive move for Marvell to acquire complementary technology to its semiconductor networking business. The addition of Celestial could allow Marvell to sell more chips and components to companies that are currently spending hundreds of billions of dollars on AI infrastructure.
Marvell’s stock price is down 18% year-to-date in 2025, despite the strong performance of its semiconductor rivals. broadcom Excitement surrounding artificial intelligence is driving stock prices up significantly.
Celestial is a startup focused on developing optical interconnect hardware (which the company calls “photonic fabrics”) to connect high-performance computers. Celestial was reportedly valued at $2.5 billion in a funding round in March. intel CEO Lip-Bu Tan joined the startup’s board in January.
Optical connectivity is becoming increasingly important in cutting-edge AI systems, as their parts must combine dozens or even hundreds of chips to work as one to train and run the largest large-scale language models.
Currently, many connections for AI chips are made using copper wires, but new systems are increasingly using optical connections because they can transfer more data faster and use physically longer cables. Optical connections also cost more.
“This builds on our technology leadership, expands our addressable market in scale-up connectivity, and accelerates our roadmap to deliver the industry’s most complete connectivity platform for AI and cloud customers,” Marvell CEO Matt Murphy said in a statement.
Marvell said the first application of Celestial technology will be connecting to systems based on “large XPUs,” custom AI chips typically manufactured by companies that invest billions of dollars in AI infrastructure.
The company said Tuesday that Celestial’s optical technology can also be integrated into custom chips, and based on customer traction, the startup’s technology will soon be integrated into custom AI chips and related components called switches.
Dave Brown, vice president of Amazon Web Services, said in a statement that Marvell’s acquisition of Celestial “will help us further accelerate optical scale-up technology innovation for next-generation AI deployments.”
The transaction’s maximum payout will be triggered if Celestial is able to record cumulative revenues of $2 billion by the end of fiscal year 2029. The transaction is expected to close early next year.
In its third-quarter results released Tuesday, Marvell had earnings of $2.08 billion and 76 cents per share on sales of $2.08 billion, compared to LSEG’s estimate of earnings of 73 cents per share on sales of $2.07 billion. Marvell said it expects fourth-quarter revenue to be $2.2 billion, slightly above LSEG’s forecast of $2.18 billion.
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